Technology Among Drivers of Used-Car Demand

CHERRY HILL, N.J. – When the automotive market came out of the recession’s tailspin, new-car demand picked back up quicker than used-car demand, a special report from TD Economics explains.

Household balance sheets were getting healthy, consumer confidence and financing conditions were stronger. And there just wasn’t a whole lot of used-car supply, the report said.

But now there is, to say the least.

And it’s younger fleet of used cars being sold, with many sporting tech innovations that have permeated the car business in recent years.

You can bet these cars will sell, and they’ll likely “provide some competition” to the new-car market.

“I do think that it is going to grow, and perhaps slightly faster than the new-vehicle market in percentage terms,” Dina Ignjatovic, economist at TD Economics, said in a phone interview, “and that’s just because of the availability that’s coming back there. And it’s the options that people have.”

She adds, “One thing that’s really attracting people into new-car showrooms is all the new technology that’s come out in recent years. And now that that’s available in used cars, you don’t need to buy a new car to get access to all these new technologies. So, I do think you’re going to see increased demand for pre-owned vehicles.”

The TD Economics report notes that the average age for a used-car sold last year was 4.4 years, a figure driven down by lease returns hitting the market and more than half the sales market being comprised of cars 3 years old or less.

“The trend is set to continue this year, as lease returns are expected to rise by about 25 percent over 2015 levels,” the report said.

Those cars are in the ideal age range for certified pre-owned, which has seen sales records for five straight years.